Liam Fox says future defence cuts are Labour's fault
Liam Fox has blamed Labour's "toxic" legacy of economic mismanagement for what he says will be inevitable cuts to the defence budget.
The defence secretary told the Tory conference the annual debt interest being paid by the UK would fund 300 helicopters and 13,000 extra troops.
Dr Fox is still locked in negotiations with the Treasury about the Ministry of Defence's budget.
But it is expected that it will face cuts of about 10% over four years.
Dr Fox's concerns about the impact of spending cuts on the armed forces were dramatically illustrated last week when a private letter to Prime Minister David Cameron - in which he warned that the scale of suggested savings were virtually impossible - was leaked.'Irresponsibility'
The defence secretary has said Mr Cameron has been his "greatest ally" in discussions over the UK's future military capability and the need to continue fully supporting the war in Afghanistan.
In his speech, Dr Fox paid tribute to all those serving there and pledged extra money to provide improved mental health services for active personnel and veterans - including a 24-hour support hotline and 30 extra specialist nurses in NHS trusts.
This would make a start in tackling a problem he described as an "unexploded timebomb" and was part of efforts to rebuild the military covenant between the government and the armed forces regarding their welfare.
End Quote Liam Fox Defence Secretary
I didn't come into politics wishing to see a reduction in our defence budget”
However, Dr Fox told delegates he had inherited a defence budget in a mess, with an overspend on big procurement projects of £38bn.
"I didn't come into politics wishing to see a reduction in our defence budget," he said.
"Neither did the prime minister. But while we can never predict where events will take us or the unavoidable bills we will have to pay as a consequences, we must confront the ghastly truth of Labour's legacy."
Ministers will publish the results of the defence review in two weeks time, amid speculation about the future of procurement deals including the £5bn contract for two new aircraft carriers.
Former Prime Minister Gordon Brown has said cancelling either of the ships would be a betrayal of the shipyards which are building them.
While Dr Fox did not comment on the future of the aircraft carriers, he said the review was taking place against an unprecedentedly "extreme" financial backdrop.
The £46bn in debt interest the UK is due to pay next year could fund four more aircraft carriers, 50 cargo planes and 10 destroyers, he argued.Contract review
"Labour behaved like some sort of out-of-control online shoppers who kept ordering more and more without ever wondering how they might pay for them when the goods arrived," Dr Fox added.
A special BBC News season examining the approaching cuts to public sector spending
He said Labour's legacy meant that the military would not be able to do all he wanted it to do in the future.
Dr Fox also said he was committed to retaining and updating the UK's nuclear deterrent - a source of tension with coalition partners the Lib Dems.
Labour has accused the government of rushing the defence review in a desperate attempt to save money when it should be focused on the UK's future security needs.
It emerged on Tuesday that the Ministry of Defence is to try to save millions by re-negotiating the rules on defence contracts.
Ministers say the 40-year-old rules - which require the MoD to contribute towards contractors' office running costs, pensions and redundancy payments - were overdue for reform.
This could also lead to the MoD reducing the cost of new military equipment, they argue.